ACCA F1 – Business & Technology | Ms. Vishah Hussain
Part B: Business organisation structure,
functions and governance
Chapter 5: Business organisation, structure and strategy
1 The informal organisation
An informal organisation always exists alongside the formal one. This consists of social
relationships, informal communication networks, behavioral norms and power/influence
structures, all of which may 'by-pass' formal organisational arrangements.
1.1 Benefits (or the role of) the informal organisation
• Employee commitment
• Knowledge sharing
• Speed in communication and meeting goals
• Responsiveness workforce
• Co-operation in organisation in communication channel
1.2 Managerial problems of informal organisation
• Social groupings may act collectively against organisational interests, strengthened by
collective power and information networks.
• The grapevine is notoriously inaccurate and can carry morale-damaging rumors.
• The informal organisation can become too important in fulfilling employees' needs:
individuals can suffer acutely when excluded from cliques and networks.
• Informal work practices may 'cut corners', violating safety or quality assurance measures.
Managers can minimize problems by:
• Meeting employees' needs as far as possible via the formal organisation: providing
information, encouragement, and social interaction.
• Harnessing the dynamics of the informal organisation.
• Involving managers themselves in the informal structure, so that they support
information sharing, the breaking down of unhelpful rules.
1.3 Group norms
A work group establishes norms or acceptable levels and methods of behavior, to which all
members of the group are expected to conform.
, ACCA F1 – Business & Technology | Ms. Vishah Hussain
The general nature of group pressure is to require the individual to share in the group's own
identity, and individuals may react to group norms and customs in a variety of ways.
• Compliance – toeing the line without real commitment
• Internalisation – full acceptance and identification
• Counter-conformity – rejecting the group and/or its norms
The Hawthorne Studies
The work of the human relations school of management theory sheds light on the importance of
groups within an organisation. Interesting findings emerged from studies conducted at the
Hawthorne plant of the Western Electric Company by Professor Elton Mayo of the Harvard
Business School.
2 Organisational structure
2.1 Components of the organisation (Mintzberg)
Mintzberg believes that all organisations can be analysed into five components, according to how
they relate to the work of the organisation, and how they prefer to co-ordinate.
, ACCA F1 – Business & Technology | Ms. Vishah Hussain
2.2 Categories of organisation (Mintzberg)
Based on the organisational model above, Mintzberg described five categories of organisation
structure.
2.2.1 Simple structure
The simple structure is centralised and often autocratic, with power concentrated at the strategic
apex. Typically, the chief executive or a small executive team exerts control. This structure can
be very flexible and informal, but it is also very vulnerable, with so much power and control
concentrated in the hands of a few people.
2.2.2 Machine bureaucracy
This structure relies heavily on a good techno structure. Strategic planners and financial
controllers are influential, with multiple layers of management, formal (often-rigid) procedures
and standardized production processes.
2.2.3 Professional bureaucracy
The professional bureaucracy is based on clear lines of authority and standard practices. The
practices are often built on standards set by law, regulations or independent external bodies,
such as professional associations (e.g. law, accountancy).
2.2.4 Divisionalised
In a divisionalised structure, a small central core provides guidelines for business units that enjoy
a high degree of autonomy. The middle line forms a strong coordinating influence, as it translates
the demands of the central core into the objectives of the operating core.
2.2.5 Adhocracy
The adhocracy is task or project-based, and needs to respond quickly to changing demands such
as rapidly evolving markets, or technological innovation. Defined processes are less important as
a result. Research and development is usually the primary driver of adhocracies.
2.3 Functional departmentation
Functional organisation involves grouping together people who do similar tasks.
Part B: Business organisation structure,
functions and governance
Chapter 5: Business organisation, structure and strategy
1 The informal organisation
An informal organisation always exists alongside the formal one. This consists of social
relationships, informal communication networks, behavioral norms and power/influence
structures, all of which may 'by-pass' formal organisational arrangements.
1.1 Benefits (or the role of) the informal organisation
• Employee commitment
• Knowledge sharing
• Speed in communication and meeting goals
• Responsiveness workforce
• Co-operation in organisation in communication channel
1.2 Managerial problems of informal organisation
• Social groupings may act collectively against organisational interests, strengthened by
collective power and information networks.
• The grapevine is notoriously inaccurate and can carry morale-damaging rumors.
• The informal organisation can become too important in fulfilling employees' needs:
individuals can suffer acutely when excluded from cliques and networks.
• Informal work practices may 'cut corners', violating safety or quality assurance measures.
Managers can minimize problems by:
• Meeting employees' needs as far as possible via the formal organisation: providing
information, encouragement, and social interaction.
• Harnessing the dynamics of the informal organisation.
• Involving managers themselves in the informal structure, so that they support
information sharing, the breaking down of unhelpful rules.
1.3 Group norms
A work group establishes norms or acceptable levels and methods of behavior, to which all
members of the group are expected to conform.
, ACCA F1 – Business & Technology | Ms. Vishah Hussain
The general nature of group pressure is to require the individual to share in the group's own
identity, and individuals may react to group norms and customs in a variety of ways.
• Compliance – toeing the line without real commitment
• Internalisation – full acceptance and identification
• Counter-conformity – rejecting the group and/or its norms
The Hawthorne Studies
The work of the human relations school of management theory sheds light on the importance of
groups within an organisation. Interesting findings emerged from studies conducted at the
Hawthorne plant of the Western Electric Company by Professor Elton Mayo of the Harvard
Business School.
2 Organisational structure
2.1 Components of the organisation (Mintzberg)
Mintzberg believes that all organisations can be analysed into five components, according to how
they relate to the work of the organisation, and how they prefer to co-ordinate.
, ACCA F1 – Business & Technology | Ms. Vishah Hussain
2.2 Categories of organisation (Mintzberg)
Based on the organisational model above, Mintzberg described five categories of organisation
structure.
2.2.1 Simple structure
The simple structure is centralised and often autocratic, with power concentrated at the strategic
apex. Typically, the chief executive or a small executive team exerts control. This structure can
be very flexible and informal, but it is also very vulnerable, with so much power and control
concentrated in the hands of a few people.
2.2.2 Machine bureaucracy
This structure relies heavily on a good techno structure. Strategic planners and financial
controllers are influential, with multiple layers of management, formal (often-rigid) procedures
and standardized production processes.
2.2.3 Professional bureaucracy
The professional bureaucracy is based on clear lines of authority and standard practices. The
practices are often built on standards set by law, regulations or independent external bodies,
such as professional associations (e.g. law, accountancy).
2.2.4 Divisionalised
In a divisionalised structure, a small central core provides guidelines for business units that enjoy
a high degree of autonomy. The middle line forms a strong coordinating influence, as it translates
the demands of the central core into the objectives of the operating core.
2.2.5 Adhocracy
The adhocracy is task or project-based, and needs to respond quickly to changing demands such
as rapidly evolving markets, or technological innovation. Defined processes are less important as
a result. Research and development is usually the primary driver of adhocracies.
2.3 Functional departmentation
Functional organisation involves grouping together people who do similar tasks.
